BELGIUM Law and Practice Contributed by: Aldo Engels, Emile Bauwens, Emma Parduyns and Vincenzo Vilardi, Loyens & Loeff
3. Methods and Method Selection and Application 3.1 Transfer Pricing Methods Belgian law does not list specific transfer pricing methods that taxpayers can use. The rules set forth in the OECD Guidelines apply to the use of transfer pricing methods within Bel - gium. Indeed, with reference to the OECD Guide - lines, the TP Circular states that the taxpayer is free to choose a transfer pricing method, pro - vided that the method chosen results in an arm’s length outcome for the specific transaction. 3.2 Unspecified Methods Belgian law does not specify which methods a taxpayer should use. Hence, a taxpayer is free to choose its preferred method to set prices, provided that those prices are consistent with the arm’s length principle. In practice, taxpayers generally use one of the five methods listed in the OECD Guidelines, although other methods may also be accepted depending on the case (eg, valuation techniques for transactions involv - ing intangibles). 3.3 Hierarchy of Methods Neither the law nor the TP Circular provide for a hierarchy of methods. According to the TP Circular, where multiple methods can be applied in an equally reliable manner, a traditional method is preferable to a transactional profit method. Moreover, if the comparable uncontrolled price (CUP) method and another transfer pricing method can be applied in an equally reliable manner, the CUP method is preferred. This position is aligned with the OECD Guidelines.
a broader scope than “control” under Belgian company law. Whether or not two entities are in a relationship of interdependence is a question of fact. This may notably be the case when: • the boards of directors of two entities consist in majority of the same persons; • one entity depends on the other for the sup - ply of raw materials; or • one entity is the other entity’s sole customer. As regards Article 185 Section 2 ITC, a circular letter dated 4 July 2006 refers to the wording used in Article 1:20 Code of Companies and Associations (CCA), according to which “com- panies associated with a company” means: • the companies over which said company exercises a power of control; • the companies which exercise a power of control over said company; • the companies with which said company forms a consortium; and • the other companies which, to the knowledge of their governing bodies, are under the con - trol of the companies referred to in the first three bullet points above. Under Section 1:14(1) of the CCA, “control” is the ability to decide the appointment of the majority of the directors or the course of corpo - rate policy, whether de facto or de jure. For transfer pricing documentation require - ments, the term “group” is defined as a collec - tion of companies that are related by ownership or control in such a way that they are either required by prevailing accounting rules to pre - pare consolidated financial statements for finan - cial reporting purposes, or would be required to do so if equity interests in any of the companies were traded on a regulated market.
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